Struggling health care company University General Health System Inc. has hired NexBank Capital Advisors as financial adviser, potentially to sell a hospital in Dallas.
University General hired NexBank to help with the sale, assumption, merger or potentially another financial transaction related to the hospital. The company has already considered a number of offers and joint venture partners, but says hiring the investment bank will help it run a more efficient process, it says in a filing with the U.S. Securities and Exchange Commission on Dec. 4.
The company has owned the hospital, formerly called South Hampton Hospital, since it bought it in 2012. Since then it invested more than $20 million in capital to provide working capital and create new programs for the hospital, now called University General Hospital Dallas, and surrounding communities. The initiatives include a geriatric psychiatric outpatient program, a breast center, diabetes screening and treatment, flu shots, scholarships for graduates looking to enter the health care field, clinics, outpatient departments and surgical centers.
"We have invested all of the resources we are willing to invest. We want to see the hospital succeed, and for the hospital to succeed, it needs a new buyer," says Don Sapaugh, president of University General. Money from the sale would help University General pay off debt, which it still has from when it made the acquisition, according to Sapaugh.
Houston-based University General operates the Dallas hospital, a hospital in Houston, plus ambulatory surgery centers, wound care centers, diagnostic imaging centers and other health care clinics.
The company said it would consider M&A opportunities as part of a restructuring process. The company announced in September that it was looking to divest several units, including: UGH Diagnostic Imaging, UGH Physical Therapy, UGH Kingwood Diagnostic and Rehabilitation Center, Robert Horry Center for Sports and Physical Rehabilitation, UGH Woodlands Physical Therapy and UGHS Waxahachie Diagnostic Center.
"Several months ago, we commenced a performance analysis of every asset of the company in order to determine which departments and/or divisions were adequately profitable, and which could be eliminated or otherwise divested without affecting our ability to maintain a healthy occupancy and surgical volume at the Houston hospital," said Hassan Chahadeh, CEO of University General.
Between the Dallas sale and other transactions, the company is hoping to eliminate between $60-70 million in debt, or about a third of its total liabilities, Sapaugh says.
The company has posted negative working capital, which raises substantial doubt about its ability to continue as a going concern, or without the doubt of liquidation, it says in a July 3 SEC filing. An increase in operating costs, past-due payroll and income-tax payments have also contributed to the going concern doubt.
University General has cut management salaries and says it will complete a restructuring plan in the second half of 2014.
For the previous edition of Turnaround Tuesday, see OxySure Systems May Need Additional Cash Following Canceled Merger.
For more struggling companies, see Mergers & Acquisitions Distressed Company Watch List.